LexCOMMISSIONER OF INCOME-TAX, MADRAS versus KUMBAKONAM MUTUAL BENEFIT FUND LTD.
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20.J. SUPREME COURT REPORTS 1964 sought to be put upon the expression "income~ in su!J:.s.' (2) CJ.T; o( s. 26 by the Revenue is . accepted, then the absence· of Express v'. News- tli.~! _word in the ?rov!-5° destroys the· argume?t. Bu! ·the. papers Lldi' more reasonable .view IS that both the sul>-section and·. the Subba-~ao J. p~ov_is() deal only with ·the profits uncl~r ihe 4th head men" tioJ'led in s. 6 and, so construed, it cxcludci capital g:tlns:· 'fl1e argument that sub-s:. (2) of s. 26 re..:d v,ith the prbviso theretO _indicates that the total · · income · of the· person · st1cceeded. is the !=r!_terion· f_?r' separate .assessment ·~-~,.: __ ..- · sub-s. (2) and for assessment and realisaticm-unoer the· ···pf.ovis0 is on. the assumption.that·ruO:S.-(2) and the proviso_ deal with all the h~uds n1entionect in s. 6 of the Act; ·nut. if,· as;ve.hav(fbeld, the scope of sul>-s.-(2)of s. 26 fa· only· ---- ··fonrted to the income from the· busirtess, ; the" share' under ---- suJ;s. (2) and the assessment and realisation•· under the 1964 l\fay 7 pro.visa can only relate to the inrome · ,from the businCs.5. The argument is really begging the question itself. ·Jn the' result we agree with the High Court in regard to" the answer it has given in respect of the second question. In. this view no other ' questidn" arises . for·· oor consideiatiOn: · , In the result, the appeal fails and is dismissed with · costs. . Appeal 'dismin.ed: COMMISSIONER OF INCOME~TAX, MADRAS v. KUMBAKONAM MUTUAL' BENEFiT FUNn LTD. I •; • . • ._ • .' • '. • ~ ' ; / . ' • . . (K. SUBBA RAo, J. C. SHAH ANDS. M. SIKRI, J.J.) Mutual Btnefit Socfety2-company engd:;id ·ili'"bmillng bU°sine.U restrldeii"J to ml'mbers-Not e,,•ery member-made ·deposit} or_ loaii.J-.P~ mainly earned fr~1n l~n.s to m~mber;-All me"m.be~$ enlitlM.llt.; diVidend~Whe.tfi~, · r~quiren?e;.tt"' of ·'mUf~i,Y·' 1>et;:een· 'cOnt~.c;;-· - ,.-.,.--- .· - , ••! '· · "';,; -, '"- .,. P. - . ' • '<' I '·•·.'I arid · · partici,,Dtors · satisfied~Ther_tfore. · w~tller company eic1"pt ,,;,a;r· i. •1ocziiwi;'1.Coine-i;._,, ;1c;;-1m · · · ~ ;,_._-' · (_ 1' ·1·-· .; ·ii··;.-' h, ;~ ,; j._A .•. I ·, /1'.:.,_ ,,~,- .The ~Ssee~ Kumb3.kon3.in ~tutual Be1:iefit Fund;. _Ltd. •. carried_. on,: ruiokini' buSiDcSS ·wbiCh. 'wis-- reStncted i.o! its s?iareholdd.t! In ·the"COum . . . ·' ' . . . . . . 8 S.C.R. SUPREME COURT REPORTS «>f ill working, recurring monthly deposits were obtained from members for an agreed number of months at the end of which, an amount, which included interest, was returned to them. From the funds accumulated .. a result of these deposits, loans were given to members and the intezat from such Joans constituted the assessee's main income. After the payment out of this income of interest on the deposits as also aU the other expenses and outgoings of management, etc., the balance was divided among the members pro rata according to their shareholdings. The shareholders who were thus entitled to participate in the profits need not have either made deposits or taken loans. Although it was c.ontendcd on behalf of the assessee that it was exempt from assessment to tax as a Mutual Benefit Society under s. 10 of the Income-tax Act, 1922, on the principle in Ne"" York Life Assurane< Co. v. Styles, 2 T.C. ~. which was followed in Board of Revenue v. Mylapore Hindu Permanent Fund Ltd., (1924) l.L.R. 47 Mad. I. the Income-tax Officer ~ the entire profits. of the asscssee. It was held by him that the profits made by the fund belonged to the members as shareholders and not as borrowers from the fund or in the capacity of individuals who had in any way utilised the facilities afforded by the fund. The require: ment of identity between contributors and participators as in Style's cast! was not satisfied. 1be Appellate Assistant Commissioner and the Incon1e~tax Appellate Tribunal, upon appeals made lo them in turn, upheld the order of the lnoome-tax Officer; the Tribunal, however, referred to the High Court, inl~t alia, the question whether there were materials for the tribunal to hold that the assessee ~·as a banking concern, asses'iahle under s. 10 and was not therefore exempt. The High Court in answering the question in the negt\tivc applied the test that both the right to contribute and the right to participate must be available to an identical body but il was not nece.
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